Coronavirus: Uber Eats' 'crippling' commission rates need to be capped by NZ Government - Restaurant Association

The Government is being called on to enforce a cap on commission rates for third-party delivery apps, with UberEats set to restart its services next Tuesday at a hefty expense for New Zealand's struggling hospitality industry.

The leading delivery app typically takes between 30 to 35 percent of the cost of the order as commission - a costly price tag for hospitality businesses struggling to stay afloat during the COVID-19 response restrictions. 

Although cafes and restaurants are required to remain closed under Alert Level 3, which will be officially implemented at 11:59pm on Monday, April 27, businesses are permitted to provide takeaway orders using contactless delivery.

With Uber Eats restarting at 10am on Tuesday, many business owners feel they have no other option but to rely on its services following four weeks of lost income. 

"Uber Eats' commissions are crippling for many hospitality businesses," Restaurant Association CEO Marisa Bidois said in a statement on Wednesday.

"With all shop fronts remaining closed and as the market leaders, Uber Eats is essentially taking the shirt off the industry's back."

With typical profit margins set at 3 to 5 percent, business owners will rely on Uber Eats under level 3 as a "loss-making marketing exercise", Bidois says. Yet refusing to work with the app is a risk many owners are unwilling to take. 

"With [Uber Eats'] marketing power and the size of their customer database, they don't feel they can take the risk," she explained. 

The Association is now urging the Government to implement a cap on commissions charged by food delivery platforms, following the lead of San Francisco, where Uber originated. 

This week, the city's Mayor placed a 15 percent cap on commissions in the Bay Area for the duration of the COVID-19 pandemic, a move the Association says will "give Kiwi hospitality businesses a fighting chance of survival".

Kiwis can also help their local go-to by placing their delivery order over the phone or through the company's website. 

The owners of a small, fast-paced Christchurch-based hospitality business, Rachael and Richard Murray, told Newshub they are struggling to continue trading in what was a "very viable business" prior to the pandemic following four weeks of no income.

Rachael Murray says it's "astounding" that Uber Eats are not open to negotiations.

"It is important for the public to see what the impact of purchasing through Uber Eats will have on businesses, as many believe their spend is going directly to the shop," she told Newshub.

"If Uber Eats aren't willing to help New Zealand hospitality, maybe the local community will be prepared to order and pick up from their local restaurant."

Bidois says the crisis is encouraging businesses to think outside the box, creating innovative solutions for online ordering at a fraction of the commission rates being charged by third parties. 

"Our business owners are also doing their very best to pivot setting up online delivery systems where there previously were none and finding delivery drivers and vehicles. Many are desperate to get back into their businesses, serve their communities and start generating some revenues, however small.

"To do this, many are working for free in their own businesses so it's a bitter pill to swallow to see Uber Eats take such a large piece of the pie," she said.

In March, Uber Eats announced $5 million in funding for independent restaurants across New Zealand and Australia that have been impacted by the pandemic. The company also said it will ensure that no restaurants pay service fees on pick-up orders until the end of June.

"We are putting in place a range of initiatives to continue to support restaurant partners, particularly small business owners, as they keep their kitchens firing to feed people across the country," Uber Eats regional general manager for Asia Pacific, Jodie Auster, said at the time. 

In a statement to Newshub, an Uber Eats' spokesperson said the restaurant support package has been designed to "simultaneously help our existing partners create offers for customers, and support new restaurants to easily and quickly get onto our platform".

The Murrays, who received the Government's wage subsidy and negotiated a 50 percent rent reduction, are critical of the package.

"They cleverly try to disguise a package that ultimately promotes Uber Eats [and] encourages spend on their platform as a commitment to supporting our restaurant community. However, this in no way helps the restaurants at this time," Rachael claimed.

In the daily COVID-19 press conference on Wednesday, Prime Minister Jacinda Ardern addressed the concerns, saying: "I would encourage consumers who are looking forward to takeaway food to look at your favourite local eatery and see if they offer delivery directly themselves, which is at a lesser cost for them as a business."

What Uber Eats has to say

In a statement to Newshub on Tuesday, the Uber Eats spokesperson said the company has "no plans" to change the commission rate for the duration of the pandemic.

"We understand that this is an incredibly difficult time for the restaurant industry and particularly small business owners. Our goal at this time is to support restaurants to stay open for business for as long as they can and to continue to capture the demand from customers through pick up and delivery.

"Given the uncertainty and potentially lengthy nature of the current pandemic, our support package is focused on measures that are sustainable for us as a business, and also help restaurant partners to continue to attract customers and increase order volumes.

"The window of this pandemic is unclear, and support for restaurants will be multifaceted,  bringing together initiatives from banks, landlords, suppliers, utility providers, insurance companies, food delivery platforms and the government."

Newshub has contacted the Ministry of Business, Innovation and Employment for comment.